Origin Energy offered to sell its Eraring power station to the New South Wales government for more than half a billion dollars before announcing it would close the plant in August 2025, a document now made public reveals.
The energy company, which last week announced a pact with the government to keep the nation’s biggest coal-fired power station open for at least another two years, had offered to sell back the privatised facility for $544m during negotiations in 2021.
The company also discussed the state underwriting two of Eraring’s four units to run between 2025 and 2028 as an alternative plan. Part of that deal would have included the government subsidising a big battery on the plant’s lower Hunter Valley site for an estimated cost of “around $334m”, according to the March 2023 document prepared by the energy department.
The details surfaced after crossbench and opposition MPs teamed up to force the government to make public how the Minns Labor government decided to subsidise Origin for 80% of losses for as much as $225m a year to keep the 2880-megawatt plant operating for two more years. The state would keep 20% of any profits.
Origin said it may decide to extend Eraring further, with a final closure set for April 2029.
Some of the released documents were available only for MPs to view. But the opposition is considering challenging their confidentiality, the former Coalition energy minister Matt Kean said.
A separate department document dated April 2023, one month after the state election delivered a change of government, estimated new renewable energy supplies backed by storage and other measures would be able to cover Eraring’s exit in 2025.
“The documents prove there was no reliability gap had the government delivered the projects in the pipeline, which were on track before we left office,” Kean, now the opposition’s health spokesperson, told Guardian Australia.
“The question has to be asked why the government failed to deliver on time and on budget, and instead offered big corporate welfare to Origin Energy.”
A spokesperson said the government “arrived at a careful risk sharing arrangement that covers the reliability gap and protects consumers against price spikes”.
“It’s up to the previous government to explain why they weren’t able to reach an agreement with Origin,” he said. “Matt Kean is on the record saying the secret advice to him at the time was that the proposal would cost $1.6bn.”
Guardian Australia sought comment from Origin.
The March 2023 document also provided some analysis of why the government rejected Origin’s 2021 approach. Origin told the government Eraring was losing money at the time and it sought a “staged closure that ameliorate[s] the impact on NSW electricity prices and reliability”.
By March 2023, though, the report by deputy energy secretary Rachel Parry included some doubt that Origin would proceed with a 2025 closure without government aid.
In particular, it noted that 70%-80% of Eraring’s annual generation went to its NSW customers.
“If Origin closes Eraring in 2025, it is not clear how it will hedge prices for its customer base,” Parry’s report said, indicating Origin would have to go into the market to buy the power to service its contracts.
“Origin would be forced to shed its customers to other retailers.”.
Rivals, which include AGL Energy and EnergyAustralia, estimate closing Eraring next year would have left Origin scrambling to cover about 1.5 gigawatts of retail contracts.
The government will table the agreement in parliament in the next sitting week.
